Problem:
Additional Funds Needed with Excess Capacity
A firm has the following balance sheet
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Cash 20.00
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Accounts Payable 20.00
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Accounts Receivable 20.00
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Notes Payable 40.00
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Inventory 20.00
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Long-term debt 80.00
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Fixed Assets 180.00
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Common Stock 80.00
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Retained Earning 20.00
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Total Assets 240.00
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Total Liabilities and Equity 240.00
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Sales for the year just ended were $400, and fixed assets were used at 80 percent of capacity, but its current assets were at optimal levels. Sales are expected to grow by 5 percent next year, and the dividend payout ratio is 60 percent. How much additional funds (APN) will be needed?